14 HASKINS & SELLS February
Insurance On the
IN an effort to minimize possible losses
a business organization ordinarily carries
insurance to provide against losses
from fire, water, cyclone, theft, accident,
and other hazards. But to limit insurance
to the conservation of tangible assets is
only partial protection. The success of an
enterprise often is due principally to the
ability of the executives who have the
direction of the resources at their disposal.
That a business organization may suffer a
loss through the death of an executive is
no longer questioned. The rule that the
beneficiary has an "insurable interest"
only when he is a near relative or a dependent
has been discarded. It is not
only permissible but expedient that a company
should protect itself against the loss
of a highly valued executive.
So-called "business insurance" is a particular
application of the principle of
security against loss through distribution
of risk which is embodied in every form of
insurance. Its function is to indemnify
the business concern against the loss of
Lives of Executives
earning power of an important officer in a
manner similar to the protection given
to a man's family of life insurance. That
earning power may be founded on various
qualities, such as peculiar managerial
ability, technical knowledge, or character.
That a fire will occur before the useful life
of a building ceases is problematical, but
that an individual will die some time is
certain. If the former type of contingency
warrants insuring, certainly the latter does.
The stupendous valuations which are
frequently (and legitimately) attributed
to good-will in many instances reflect the
earning power of executive brains. It is
only logical that the income from goodwill
be protected as well as the returns
from any tangible asset.
Business insurance is applicable to any
type of organization, whether it be single
proprietorship, co-partnership, or corporation.
The man who is in business for
himself may be solely responsible for the
success of his business. He may wish to
protect his family against his premature